The Senate Record is the official publication of the University Faculty Senate
of The Pennsylvania State University, as provided for in Article I, Section
9 of the Standing Rules of the Senate and contained in the Constitution, Bylaws,
and Standing Rules of the University Faculty Senate, The Pennsylvania State
University 2002-03.

The publication is issued by the Senate Office, 101 Kern Graduate Building,
University Park, PA 16802 (Telephone 814-863-0221). The Record is distributed
to all Libraries across the Penn State system, and is posted on the Web at http://www.psu.edu/ufs
under publications. Copies are made available to faculty and other University
personnel on request.

Except for items specified in the applicable Standing Rules, decisions on the
responsibility for inclusion of matters in the publication are those of the
Chair of the University Faculty Senate.

When existing communication channels seem inappropriate, Senators are encouraged
to submit brief letters relevant to the Senate's function as a legislative,
advisory and forensic body to the Chair for possible inclusion in The Senate
Record.

Reports that have appeared in the Agenda of the meeting are not included in
The Record unless they have been changed substantially during the meeting or
are considered to be of major importance. Remarks and discussion are abbreviated
in most instances. A complete transcript and tape of the meeting is on file.
Individuals with questions may contact Dr. Susan C. Youtz, Executive Secretary,
University Faculty Senate.

TABLE OF CONTENTS

I. Final Agenda for October 22, 2002

A. Summary of Agenda Actions

B. Minutes and Summaries of Remarks

II. Enumeration of Documents

A. Documents Distributed Prior to October 22, 2002

Attendance

III. Tentative Agenda for December 3, 2002

FINAL AGENDA FOR OCTOBER 22, 2002

A. MINUTES OF THE PRECEDING MEETING -
Minutes of the September 10, 2002, Meeting in The Senate Record 36:1

Senate Council - "Update on the Dickinson School of Law."
This oral informational report presented by Dean Philip McConnaughay discussed
the place of the Dickinson School of Law among other Big Ten law schools and
what steps would be required to improve its rankings. He also discussed the
nature of recent trends in legal training and what Dickinson is doing to incorporate
those changes in its curriculum. (See Record, page(s) 7-11 and Agenda Appendix
"B.")

University Planning - "Budget Presentation for 2002-03." Executive
Vice President and Provost Rodney Erickson presented a summary of the 2002-2003
Operating Budget with emphasis on cost drivers such as salaries and benefits,
facilities, and program adjustments. He also summarized the University's budget
plan and appropriation request to the commonwealth for 2003-04. (See Record,
page(s) 15-27 and Agenda Appendix "D.")

The University Faculty Senate met on Tuesday, October 22, 2002, at 1:30 p.m.
in Room 112 Kern Graduate Building with John W. Moore, Chair, presiding. Two
hundred and five Senators signed the roster.

Chair Moore: It is time to begin.

MINUTES OF THE PRECEDING MEETING

Moving to the minutes of the preceding meeting, The Senate Record, providing
a full transcription of the proceedings of the September 10, 2002 meeting, was
sent to all University Libraries, and it will be posted on the University Faculty
Senate's web page. For that reason we will have the opportunity to approve the
minutes at our December 3, 2002 meeting.

COMMUNICATIONS TO THE SENATE

You have received the Senate Curriculum Report for October 8, 2002. This document
is posted on the University Faculty Senate's web page.

REPORT OF SENATE COUNCIL

Also, you should have received the Report of Senate Council for the meeting
of October 8, 2002. This is an attachment in The Senate Agenda for today's meeting.

ANNOUNCEMENTS BY THE CHAIR

Chair Moore: I am very pleased that everyone is now in a seat with a number
and all members of the Senate should be grateful to Bob Myrick of the Office
of Physical Plant for seeing to it that seat numbers have been installed in
a sequential fashion and that order once again prevails in the Senate seating
arrangements. Executive Secretary Susan Youtz and the Senate staff deserve our
gratitude for bringing their genial pressure to bear on the issue.

The Senate Officers are now midway through their fall visits to locations outside
University Park. To date we have visited Hazleton, Penn College, Altoona, Dickinson,
York and Mont Alto. We will visit Erie on October 28, 2002; Beaver and Shenango
on October 29, 2002. We will visit Hershey on November 5, 2002, Scranton on
November 14, and Wilkes-Barre on November 15, 2002. We will appreciate any help
that you can give us in encouraging students and faculty to visit with us when
we come. We have discovered that we particularly enjoy meeting the students
and would like it very much if eight to ten students volunteer to appear, so
do your best.

We have with us today a new member of the Senate Office staff. Kadi will you
please stand? Kadi Winner has joined the office as part of the curriculum area.
Kadi comes from the Department of History in the College of the Liberal Arts.
She is a graduate of South Hills School of Business and Technology. Welcome,
Kadi, and we look forward to working with you.

Senators: Applause.

Chair Moore: The second Senate Newsletter for 2002-2003 was sent to all units
last week and by now you should have received your copy of that via email. The
first newsletter got many responses and seemed to achieve the newsletter's goal
of keeping faculty informed about what the Senate is doing. I will appreciate
any suggestions that you may have for improving the newsletter as the year goes
on.

The new turquoise edition of the Senate Constitution, Bylaws, and Standing
Rules of the University Faculty Senate for 2002-2003 was sent to each Senator
last week. You should have your copy of this publication by now. Please let
us know if any errors have slipped by our vigorous editing safeguards.

The current issue of the Best Doctors in America 2001 includes the names of
many of our colleagues from the Hershey Medical Center. Two in that list are
members of the University Faculty Senate-Dwight Davis and Edward Bollard. And
one is a member of the Board of Trustees-Dave Joyner. May I ask the two Senators
if they are present to please rise so we can applaud them for that achievement?

Senators: Applause.

Chair Moore: I would now like to welcome our colleagues from the University
of Minnesota Faculty Senate and the Faculty Consultative Committee who are visiting
Penn State and who are participating in many Senate and Senate-related meetings
and activities. Last year, John Nichols and Susan Youtz visited the University
of Minnesota and participated in their meetings. We are pleased to have the
opportunity to host a return visit for our Golden Gopher colleagues. We learned
a lot from them last year and we hope that they have learned something from
their visit with us. Now let me introduce each of the Minnesota guests and may
I ask each of you to stand and remain standing until all have been introduced.
Here with us today are Dr. Daniel Feeney, Chair, Faculty Consultative Committee
and Professor of Veterinary Medicine. Dr. Judith Martin, Vice-Chair, Faculty
Consultative Committee and Professor of Geography. Dr. Gary Engstrand, Coordinator
and Secretary Liaison to the University Senate. Vickie Courtney, Coordinator
and Senate Liaison, and Becky Hippert, Executive Assistant, University Senate
Office. Welcome to Penn State.

Senators: Applause.

Chair Moore: Since our last meeting two Penn State faculty members have received
major scholarly awards and both are with us today so that we may recognize them
for their achievements and to honor them. May I ask Professor Lee Ann Newsom
to join me at the podium?

Lee Ann Newsom, Professor of Archaeological Anthropology, is one of this year's
MacArthur Fellows. As you may all know, each MacArthur Fellow receives $500,000
of "no strings attached" support over the next five years. I can imagine
everyone's mind racing with what they can do with $500.000. Professor Newsom
is Penn State's second MacArthur Fellow. The first is Alan Walker. He, too,
is in Anthropology. Not only that, but the two Anthropology Department MacArthur
Fellows have offices right next to one another on the third floor of Carpenter
Building. Where is Carpenter Building? Right now, we are in Kern Building. And
we all know where the Nittany Lion Inn is located. Well, to get from Kern to
the Inn, one walks by Carpenter. If you were to take the elevator to the third
floor of that building, you would see, as the doors open, a sign with an arrow
pointing to the right. The sign simply says: "Genius wing, this way."
What do you have to do to get $500,000 over five years with no strings attached?

You have to be a paleoethnobotanist. That is, you must investigate ancient
plant life in Southeastern North America and the Caribbean. Professor Newsom
analyzes fossilized plant and wood remains, i.e., fragmentary, waterlogged or
charred remains excavated from archeological sites, and gleans valuable new
insights into subsistence strategies and the use of natural resources by prehistoric
populations. She is widely credited with identifying and analyzing ancient gourds,
some dating as far back as
12,500 years and developing new interpretations of human cultivation of the
earliest domestic plant in North America.

Professor Newsom's investigations have resulted in new methods for identifying
and cataloging early plant and wood species as well as establishing an important
database of information for future research. Her work has expanded the range
of prehistoric Caribbean archaeology; and her research has proved valuable to
environmentalists, historians, an others outside the fields of archaeology.
She is currently pursuing paleoethnobotanical fieldwork in the Caribbean, Florida,
Puerto Rico, South America coastal Peru, and Amazonia.

The field of prehistoric human ecology focuses on how past societies used-and
sometimes abused-biotic resources, especially plants and forest environments.
Her projects in the Caribbean Islands track the migration and settlement patterns
of early human groups as they moved from the region of the Amazon north through
Venezuela and settled in the islands four to six thousand years ago and began
the development of uniquely Caribbean crop and home garden systems. Sites currently
under analysis range from a small coastal settlement in Puerto Rico dated approximately
4,000 years from the present to a large Taino Indian village in northern Haiti
which is believed to be the location where Christopher Columbus's ship the Santa
Maria was wrecked in 1492.

Professor Newsom has done a considerable amount of work with preserved plant
remains from terrestrial and waterlogged deposits called "wet sites"
in North America helping to clarify the position and role of eastern North America
as an independent center of plant domestication. She is currently analyzing
a series of Archaic Period (ca 8,000 years old) cemeteries in pond bottoms (that
is human burials placed directly in the sediments of the pond bottom) and late
Pleistocene (ca. 40,000 to 10,000 years before the present) deposits submerged
in freshwater springs that preserve the remains of extinct megafauna-all in
Florida. The former sites are shedding light on the mobility patterns of ancient
human foragers; the latter also include abundant dung deposits from the American
mastodon providing an opportunity to study the diets and foraging behavior of
an extinct animal taxon. She is currently involved as a paleobotanist on two
projects designed to investigate post-Pleistocene changes in sea level, with
reference to modern global warming issues.

Professor Newsom did her graduate work at the University of Florida pursuing
multidisciplinary studies in anthropology and archaeology as well as in botany,
forest resources, and geology. For eight years, she served as curator or Associate
Scientist with the Center for Archaeological Investigations at Southern Illinois
University and joined the Penn State faculty in January 2002. Her work has resulted
in many scientific publications-articles, book chapters, reports, an edited
volume, a co-authored volume now in the press, and another on the way.

Professor Newsom adds that growing up in northern Florida-camping and spending
lots of time roaming the local swamps and forests and thinking about the ancient
people and how they lived as well as spending summers in the Caribbean-
provided good background and the beginnings of a life-long interest in prehistoric
biota, people, and landscape dynamics.

These early preoccupations and musings have blossomed into a distinguished
scholarly career now internationally acknowledged for its excellence and importance
by virtue of being named one of this year's MacArthur Fellows. The Penn State
University Faculty Senate is pleased to welcome you today and to honor you for
your achievements. Congratulations, Professor Newsom.

Senators: Applause.

Chair Moore: May I ask Professor Robert Proctor to join me at the podium? At
the Academic Convocation held on September 13, 2002 at Eisenhower Auditorium,
Provost Erickson identified the nine members of the Penn State faculty who are
Fellows of the American Academy of Arts and Sciences. The newest member of this
distinguished group is Robert N. Proctor, Ferrée Professor of History.
In a ceremony on October 6, 2002 at Harvard University, Professor Proctor was
formally inducted into the Academy along with Senator Edward Kennedy, Daniel
Schorr, and other luminaries. We are pleased to have him with us today so that
his Penn State faculty and Senate colleagues can honor him for his achievements.

A graduate of Indiana University with a B.S. degree in Biology where he did
early cloning experiments with Robert Brigg, Professor Proctor received his
graduate training in the History of Science at Harvard University where he studied
and taught with Stephen Gould. He joined the Penn State faculty as an Associate
Professor in 1990, became professor in 1993, Distinguished Professor in 2000,
and in 2002 was named Ferrée Professor of History. In 1997 he received
Penn State's Faculty Scholar Award for Outstanding Achievement. He was an instructor
in Biology at Harvard and he also taught at Berkeley, and the New School for
Social Research. Among his many other honors, he has served as Senior Scholar
in residence at the Holocaust Memorial Museum in Washington and the Max Planck
Institut fur Wissenschaftgeschichhte in Berlin.

Professor Proctor's field is the history of science with particular focus on
scientific controversies that spring up where science, ethics, and politics
collide and intersect. Since 1988, Professor Proctor has published four major
books with three more underway. The titles tell us of his interest in the politics
of science and how politics shapes science. In 1998 he published Racial Hygiene:
Medicine under the Nazis. In 1991 saw the appearance of Value-Free Science?
Purity and Power in Modern Knowledge, an early epic to historicize the ideal
of objectivity. In 1995 he published Cancer Wars. How Politics Shapes What We
Know and Don't Know About Cancer, a book later made into a four-part PBS documentary
that won him an invitation to serve on the board of directors of the National
Cancer Institute in Canada. In 1999, The Nazi War on Cancer, showed that Nazis
were the first to recognize tobacco, asbestos and indoor radon as cancer hazards.
This book has since been translated into six languages. He is working on a book
to be called Darwin and the History of Life, another to be called Agate Eyes,
and yet another A History of Molecular and Paleoanthropology.

It may seem easy for the human mind to separate good from evil and to keep
them apart, wholly isolated one from another. Some things are simply good, and
others are totally evil. It is far more difficult to live with paradox, in a
world filled with contradictions where one must simultaneously embrace opposites.
Professor Proctor's genius in his two books on Nazi medicine lies in compelling
his readers to confront some very uncomfortable historical truths about the
place of science in Germany during the 1930s. And he shows that Nazis scientists
were pioneers in cancer research and environmental cleanliness. Indeed their
war on cancer was the most aggressive in the world emphasizing restrictions
on the use of asbestos and lead, bans on tobacco, and bans on carcinogenic pesticides.
Nazis encouraged the consumption of soybeans, and they passed laws requiring
bakeries to produce whole-grain bread. Historians, he writes, look for patterns
in jarring juxtapositions, for out-of-place oddities as keys to larger truths.
One pattern that emerges from his study is that the Nazi concern with the purification
of the German body from environmental toxins is linked with the purification
of the German body politic from racial aliens. What links the two is to view
Nazism as a vast hygienic experiment designed to bring about an exclusionist
sanitary utopia. Professor Proctor's works fulfill the historian's great task
of compelling us to confront the past truthfully and to accept it with all its
complexities. Only by appreciating those complexities can we open our eyes to
new kinds of continuities binding the past to the present.

Thank you Professor Proctor for helping us to see portions of the past more
clearly, and congratulations for receiving the recognition that your studies
well deserve.

Senators: Applause.

COMMENTS BY THE PRESIDENT OF THE UNIVERSITY

Chair Moore: President Spanier is not in attendance today because he is attending
a meeting of the United States Commission on Opportunities in Athletics.

FORENSIC BUSINESS

None

UNFINISHED BUSINESS

None

LEGISLATIVE REPORTS

None

ADVISORY/CONSULTATIVE REPORTS

None

INFORMATIONAL REPORTS

Chair Moore: As we begin our discussion of these reports, I remind you to please
stand and identify yourself and the unit you represent before addressing the
Senate.

Senate Council is sponsoring an informational report designed to provide the
Senate with an Update on The Dickinson School of Law. Senate Council has provided
20 minutes for this presentation and discussion.

At the Board of Trustees meeting held at The Dickinson School of Law this past
July, the Senate Officers heard the new dean of the law school speak. We were
so impressed that we immediately decided to request Senate Council to invite
Dean McConnaughay to address the entire Senate and he has graciously agreed
to do so today.

Since July of this year, Philip J. McConnaughay has been Dean and The Donald
J. Farage Professor of Law at The Pennsylvania State University Dickinson School
of Law in Carlisle. He is the author of several scholarly articles and edited
books concerning international commercial dispute resolution, the regulation
of international commerce, and the role of arbitration in economic development.
Dean McConnaughay has been a Visiting Professor at Northwest University in Xi'an,
China, and he has lectured on development and intellectual property issues in
China, Vietnam, and Europe. For eighteen years, Dean McConnaughay practiced
law as a resident partner in Tokyo and Hong Kong. His work included representing
Fujitsu Limited in the celebrated IBM/Fujitsu Arbitration, a multi-billion dollar
dispute concerning worldwide intellectual property rights in mainframe computer
operating system software. Dean McConnaughay has also served as an advisor to
the Government of Indonesia with respect to the drafting of a new arbitration
law, and he consulted with the U.S. Department of Justice concerning its antitrust
prosecution of Microsoft Corporation. Previously, Dean McConnaughay served as
Special Deputy General Counsel to the United States Equal Employment Opportunity
Commission. He is a graduate of the University of Illinois.

We are delighted to have Dean McConnaughay with us today to discuss The Dickinson
School of Law. Dean McConnaughay.

SENATE COUNCIL

Update on The Dickinson School of Law

Philip J. McConnaughay, Dean, The Dickinson School of Law: The weekend before
last was the Alumni Weekend at the law school, and I am finding that our graduates
are a pretty interesting group of people. I think we had six federal judges
show up, including the first woman Chief Judge of the Federal District Court
for the Middle District of Pennsylvania. A Justice of Pennsylvania's Supreme
Court was there; Pennsylvania's first elected Attorney General was there; Pennsylvania's
first woman Secretary of Agriculture was there; the first woman President of
the Pennsylvania Bar Association was there; and there were more state court
judges and legislators than I could count.

Some of our other grads were not able to attend. Tom Ridge, Pennsylvania's
former Governor and the current Director of Homeland Security sent his regrets,
as did United States Senator Rick Santorum and Jesse Arnelle, a leader of the
California Bar and the former Chair of the Penn State Board of Trustees. U.S.
Court of Appeals Judge Brooks Smith could not make it, and neither could Lewis
Katz, the owner of the New York Nets.

I suspect you are getting my point.

The Dickinson School of Law was 21 years old when Penn State University was
founded. We are the oldest law school in Pennsylvania, the fifth oldest in the
United States, and we have been turning out graduates like these for the last
168 years. The first U.S. Senator from Oregon was one of our graduates. The
Civil War Governor of Minnesota was one of our graduates. One of the first Native
Americans to attend law school graduated from Dickinson in 1911. Our first African-American
graduate, graduated in 1909.

As part of its annual survey of graduate schools, U.S. News & World Report
asks judges and lawyers throughout the United States for their opinion of the
standing of all American law schools. There are four tiers of law schools in
the resulting rankings. Penn State Dickinson consistently ranks better than
all of the fourth tier schools, better than all of the third tier schools, better
than all of the second tier schools, and many of the first tier schools. We
are solidly in the first tier when you ask judges and lawyers about law school
reputations.

When U.S. News & World Report asks the same question of law professors
and law school deans, Penn State Dickinson ranks below all of the first tier
schools, below all of the second tier schools, below most of the third tier
schools, and below some of the fourth tier schools. We are solidly a third or
fourth tier school when you ask law professors and law school deans.

This disparity reflects the situation upon the completion of the merger between
The Dickinson School of Law and Penn State University in 2000: the law school
had an impeccable, almost amazing, history of achievement - right up through
today, combined with a seriously eroding reputation in the legal academy.

I believe that there are four factors that are probably responsible for the
slide in our academic reputation.

First, the diversity of our student body is unacceptably low. We had no Black
males in our entering class for 2000-2001. That same year, we had only four
Black males in our entire student body of over 580 students; Black men and women
together that year were only 2.6 percent of our student body. Our total student
body diversity that year was only 7.6 percent; the next year it was only 8.1
percent. By way of comparison within the Big Ten/CIC, the law schools at Michigan
State and Ohio State are over 20 percent diverse; Chicago, Michigan, and Wisconsin
are all close to 25 percent diverse; and Illinois and Northwestern are close
to 30 percent diverse.

Second, our student/faculty ratio is the highest in the Big Ten/CIC. In fact,
in 2001, our student/faculty ratio ranked in the bottom 20 percent of all 182
ABA-approved law schools in the United States. Our Big Ten/CIC peers uniformly
rank in the top 20 percent of all ABA-approved law schools.

Third, the median and top quartile LSAT score of our student body are the lowest
in the Big Ten. In fact, our top quartile LSAT is not as high as the bottom
quartile LSAT at most other Big Ten schools. In 2001, our top quartile LSAT
dropped to 120th out of all 182 ABA-approved United States law schools.

Finally, we have not been doing an effective job of exposing either (i) the
nationwide pool of prospective law school applicants or (ii) the rest of the
legal academy, to the significant scholarly productivity, achievements, and
inclusiveness of our faculty. Paradoxically, in fact, even though we have the
least diverse student body in the Big Ten, we have one of the most diverse -
and in my view, most talented - faculties in the Big Ten. Yet, you can search
our website and our publications until you are weary and you will not find convincing
evidence of that anywhere.

My complaint suggests the solution to these problems that I have mentioned.
We need to get the word out from the law school about who we are and about how
inclusive we are. I believe that our student body diversity and academic credentials
both will improve if we only start telling prospective applicants more effectively
who will teach them if they come to Penn State Dickinson. These prospective
students need to know, for example, that if they come to Penn State Dickinson,
they will be able to take human rights law from Professor Stephanie Farrior,
an established scholar in the area and the immediate past Legal Director of
Amnesty International in London. They need to know that they will be able to
study bankruptcy and commercial law from Professor Peter Alexander, an African-American
scholar with superior publications and national stature in those fields. Peter
is asked year after year to teach bankruptcy law to Federal Bankruptcy Court
judges.

Our prospective applicants need to know that Professor Victor Romero, a Filipino-American
scholar who is the past President of our regional NAACP, teaches and writes
at the law school in the areas of immigration and constitutional law.

They need to know that Professor Larry Cata Backer, a Cuban-American scholar
with several highly acclaimed articles and books will teach them comparative
corporate law, and, that Professor Carla Pratt, an African-American scholar
whose recent publications focus on professional ethics and affirmative action
in education, offers a thoughtful and provocative seminar on "Race, Racism,
and American Law." They need to know that Professor Katherine Pearson,
a member of this Senate, supervises one of the most exciting and important Elder
Law Clinics in the United States.

I could go on but I believe my point is clear: Penn State Dickinson is not
lacking in attributes attractive to a meaningfully diverse student body, we
are failing adequately to convey those attributes to potential law school applicants.
We are in the midst of developing new publications and a new website in order
to address this problem.

We are also getting some outstanding professional help with our admissions
effort. Just last week, Janice L. Austin became Penn State Dickinson's first
Assistant Dean for Admissions and Financial Aid. Janice joined us from the University
of Pennsylvania Law School, where she also held that same post. Janice, who
happens to be African-American, is one of the top admissions professionals in
the United States. Prior to joining Penn, she was the Director of Admissions
at the University of California Hastings College of Law, and before that the
Assistant Director of Admissions at Columbia University's Graduate School of
Business. Janice is a recent Member of the Board of Trustees of the Law School
Admissions Council (which administers the LSAT), a Member of the Advisory Board
of the Access Group, and the President of Philadelphia's Center for Gay Civil
Rights. She has published on topics such as Diversity in Higher Education, Financing
a Legal Education, Affirmative Action, and Disability Issues in Law School Admissions.
At Penn, Janice was the advisor to the Black Law Students Association and to
the Gay and Lesbian Law Student Organization. We feel very lucky to have her
at Penn Sate Dickinson.

Another initiative related to enhancing our academic reputation is the direct
result of support the law school is receiving from Provost Erickson. Specifically,
even though the university and the law school, at the law school's request,
remain financially independent following their merger, Provost Erickson is providing
bridge funds sufficient to enable the law school to hire several additional
faculty pending the retirement of several of our senior faculty. Our first faculty
appointment pursuant to this program reflects both the standards we intend to
employ at the law school in making these appointments, and the depth of our
commitment at Penn State Dickinson to enhancing our national reputation for
outstanding scholarship.

On January 1, 2003, Professor Thomas Edgar Carbonneau will be joining our faculty.
Tom currently is the Moise S. Steeg, Jr. Professor of International Law at Tulane
University School of Law, and he commonly is regarded as one of the world's
leading experts on international and comparative arbitration. Tom is a former
Rhodes Scholar and the author of nine highly acclaimed books and over 75 scholarly
articles. When we asked leading professors at our country's most elite universities
for references on Tom, he was variously described as "one of the great
legal scholars of his generation," as a scholar who is "at the very
top of the field of international arbitration," and as someone whose hiring
will have a "tremendous impact internationally on Dickinson's reputation."

Let me close by suggesting in a more overarching way why I believe the law
school's merger with Penn State is certain to result in an enormous enhancement
of the law school's academic programs and standing.

Legal education in the United States today is on the verge of being transformed
by two developments. The first is the internationalization of law and legal
practice. Commerce and communications are no longer constrained by geographic
or political boundaries, and transnational law practice is becoming commonplace.
The rule of law is reaching and taking hold in developing nations around the
world, and there is intense foreign interest in U.S. legal education as a result.
Although the demand for legal services in the United States is beginning to
slow after so many years of exponential growth, the demand for legal services
outside of the U.S. is growing dramatically. These trends foreshadow a substantial
and sustained internationalization of U.S. legal education. We increasingly
must equip our new lawyers with a deep appreciation and awareness of different
cultures, different legal traditions, different expectations, and different
notions of truth and justice.

At the same time, law and legal education are becoming increasingly science-based
and interdisciplinary. Courtroom practice today, for example, regularly involves
scientific proof and counter-proof and extended testimony and evaluation by
expert witnesses. Regulatory and policy decisions of great importance to our
environment, to our health, and to our security hinge more and more on questions
of cutting-edge science and technology. New industries have arisen to exploit
advances in fundamental science, most notably in molecular biology and information
technologies, and this development, in turn, has given new dimension and prominence
to the law of intellectual property. Last year the National Academy of Sciences
published a report declaring "A Convergence of Law and Science," and
I think that phrase nicely captures the rich intermingling of these fields.

If legal education is going to keep pace with these two developments - the
internationalization of legal practice and the intermingling of science and
law - we must endeavor as educators to provide our students, who will be the
lawyers and leaders of tomorrow, with more interdisciplinary classes, more joint
degree opportunities, more faculty with joint appointments in multiple disciplines,
and more faculty of different nationalities. I have no hesitation in predicting
that the law schools that will be best able to provide these innovations will
be those law schools, like Penn State Dickinson, that are part of a world-class
research university.

I would be happy to answer any questions you might have.

Chair Moore: Dean McConnaughay would be pleased to answer questions.

Philip J. McConnaughay: Thank you.

Senators: Applause.

Chair Moore: The Senate Committee on Faculty Benefits is sponsoring an informational
report today entitled, Employee Benefits Update for 2003. Deidre Jago is chair
of that committee. Senate Council set aside 15 minutes for questions and answers
after the presentation.

SENATE COMMITTEE ON FACULTY BENEFITS

Employee Benefits Update for 2003

Deidre E. Jago, Chair, Senate Committee on Faculty Benefits

Deidre E. Jago, Hazleton Campus: Good afternoon. I am pleased to bring you
an oral informational report in addition to the report that is printed in your
Agenda. Billie Willits from the Office of Human Resources is going to be presenting
some specific information about the rate increases that you will be able to
analyze when you choose which plans you wish to participate in for the 2003
year. Many of you probably already received the notification in the mail. Remember
that November is the time to choose. We felt in the Senate Committee on Faculty
Benefits that it was very important for the faculty to be aware of the anticipated
price increases that are going to be instituted for the 2003 calendar year.
So if you would please give Billie your attention she will be presenting a PowerPoint
presentation followed by questions. If you have individual questions concerning
your benefits choices or individual questions that you would like to have answered,
please feel free to contact the human resources office for that specific question.

Billie Willits, Associate Vice President for Human Resources: Thank you. The
majority of concerns around benefits tends to focus in two areas-health care
plans and retirement plans. I would like to spend a few moments today emphasizing
a number of points that are already in the written material that you received
in your Senate packet. I would like to address first the health care plans.
You will find that indeed this year the same as last year there are a number
of circumstances that affect health care plans. Clearly the health care provider
community, the employers, and the insurance companies themselves all have tendencies
to have been in a state of flux.

In addition, what you will find is, that as in the past, pharmaceutical costs,
technology and litigation otherwise known as malpractice insurance have driven
the costs of health care plans.

To that end, the university has attempted to retain as much of the plan design
as we know it. We have attempted not to cost shift onto the employee as other
employers have, any more than we think is relatively reasonable. To that end,
those of you who are in health care plans, the health maintenance organizations
where you have seen a $5 co-pay you will see that co-pay per office visit go
to $10. For those of you who are interested, that means that the actual health
maintenance organization rate for 2003 will have been affected by two percent.
In other words, had we not moved from a $5 to a $10 co-pay we would have seen
an additional two percent on your HMO rate. An important point to know that
some of you are in geographical areas in Pennsylvania where you already have
a $10 co-pay and indeed a few of you are in $15 co-pay. In benchmarking this
particular detail of plan design we are finding that the $10 and even the $15
co-pay for office visits is more common. Consequently, we felt reasonably comfortable
that moving from the $5 to the $10 co-pay was a good plan design change.

In addition, those of you who are in Plan A, which is the Indemnity Plan, those
of you that are in the Health Pass PPO or the preferred provider organization
and those of you who are using the maintenance prescription drug program are
asked to use generic drugs whenever possible. Obviously, if your physician thinks
that it is medically necessary that you use brand drugs, those will be allowed.
Finally, I had a number of people question whether or not the Indemnity Plan,
otherwise known as Plan A, will continue? Yes, it will continue. We will continue
to use it, not for new membership but rather for those of you who need to use
it from time-to-time depending on your circumstance. The most common for faculty
are the sabbatical leave use. I just would like to emphasize that if you or
your colleagues are scheduled to go on sabbatical and you have been in the HMO
or in the PPO and you would prefer to go into the Indemnity Plan while you are
away from your campus or college for sabbatical leave, please let us know. You
can move into the Indemnity Plan at any point during the benefit year. You can
come back out of that Indemnity Plan and go into your HMO or your PPO during
the year. There is a lot of flexibility there so please use it if you need to.
Just let us know and we will make the movement for you.

The Geisinger Health plans, that is the health maintenance organization, the
point of service and for our retired colleagues who might be in Geisinger Gold
need to make sure that you change plans. We will not be offering the Geisinger
products throughout Pennsylvania. However, they will remain in the following
counties. We do not have sufficient support networks in these counties to leave
the Geisinger plan but for everyone else who is not in these particular counties
please do make another choice for your health care plan. This is an important
change for us at the university. One of the ways that we are attempting to keep
the cost increase in some moderation is that we are trying to combine our risk
pools. And what that means for us is that we are trying to get as many of our
faculty, staff and their families into one group as possible. The larger the
group the least amount of variation you see from year-to-year. In other words,
if there are high cost claims and the group is larger there is less of an impact
on the rate overall. So we are attempting to bring that risk pool together as
much as is possible.

In addition, those of you who are basically in the northwest part of Pennsylvania
will see that you will have a new option this year, and that is Keystone West
in these counties. For those of you who may be in Venango County we now have
some managed care in that county. This has been long coming but I am glad that
we are finally there. In addition, and this is an important point, HealthAmerica
will be offering a point of service coverage in all of the counties where they
currently are offering an HMO. A number of you took the time to talk with us
as we announced that we were going to be eliminating the Geisinger point of
service and said to us we need a point of service or some coverage like the
point of service. We were able to work with HealthAmerica to come away with
a reasonable rate and we will be offering this point of service wherever they
are licensed to do business in Pennsylvania.

This is a quick look at what the HMO coverage will be for 2003. Similarly,
a quick look at what point of service coverage will look like for 2003. You
will see that in both cases we have managed care in as many counties as we can
find available to us.

Let me share with you then that the rates for 2003 while they definitely are
increasing are as moderate as we can make them at this point in time. I should
also say to you that we continue to look at that point of service plan design
because we do believe that might be the plan that will best serve all of us
across Pennsylvania in the future. But we do not have the data to absolutely
confirm that at this point in time so you will continue to see the indemnities.
You will continue to see the preferred provider organization, point of service
as well as the HMOs.

Now, I am prepared to give you rates for 2003 for our products that we are
going to be offering. The slides here present those that have the largest membership.
So if you are a member or if your colleagues are a member of a plan that doesn't
show here you will be seeing all of the rates for 2003 in a letter that will
be sent out this Friday. So early next week you should be receiving all the
rates for 2003 as it relates to the health, dental and vision plans.

Let me begin then with the Indemnity Plan. I think we know historically this
is the plan that has the highest rate in them because they are accident and
illness plans. You can use any physician anywhere at anytime. This plan is self-insured.
That means that the university pays a very modest fee for the administration
of this plan. The bulk of the money goes directly to claims. So the claims that
we file are the claims we pay for and there is not a profit for any insurance
company built in. We are the insurer for this plan. You will see that the cost
for family for example, is going to be $988. Of that cost per month we are asking
the employee to pay $253.51.

In the case of the Healthpass PPO the family coverage cost is going to be about
$198.00 per month, again, this is a self-insured plan.

The point of service plan that we have available to us for 2003 in those counties
where we do have coverage will be $168.82 for family coverage, while the university
will be paying $480.50 for that same coverage.

The HealthAmerica HMO will be at $80 and for those of you who want to have
a sense of this. That $80 rate is actually a pre-tax rate. So that if you translate
it into your tax bracket you will likely find that this $80 is actually about
$60 in actual out-of-pocket expense.

The Aetna HMO in the Philadelphia area is the area that we continue to see
escalating, benefit costs. The family plan there will cost $128.26 for the employee.

Dental rates are going up much more moderately. This is about a three and a
half percent increase over the previous year.

Vision is about a two percent increase over the previous year.

Having said that, the material in your Senate packet talks about where we want
to go for the future. We know that there will be continued increases in the
premiums. We also know that the phase-in will continue for those people who
are in the HMO. We will look at modest plan designs and will continue to evaluate
a plan design that I spoke of last year and that has to do with the defined
contribution plan.

I do want to bring your attention to one item that has come to us on a number
of occasions. It has to do with immunizations and the question is quite basic.
Why don't our health care plans cover immunizations? If you are in a plan that
provides preventative care you will find that there is well child care. That
still exists. But, by-an-large, in our plans as well as plans of other employers
you do not see immunization coverage very often. The reason is fairly simple.
It is that it would add about a $2 per month, per family to our rate. And we
have opted not to include the immunizations at this point in time in order to
try to keep the rate for everyone as reasonable as possible. What we do have
through our clinic is the opportunity to get immunizations at a price that is
usually less than that provided through your primary care physician or your
personal physician. Unfortunately, this clinic is available only here at University
Park. It is available to you and to your families. If you are away from University
Park and are inclined to do some price checking and find that it is reasonable
to spend a wonderful day at University Park and drive the family here and get
your immunizations and have a little bit of ice cream at the Creamery, this
might be appropriate for you. But clearly, this is the solution that we have.
It is not totally adequate but it is the best that we can offer at this point.

TIAA-CREF has notified us that they have sold their group plan business including
the Long Term Disability Plan to The Standard by June 30, 2003. The Standard
has agreed to honor all our current plan design for at least two years. We will
be reviewing The Standard and will be reviewing our plan design during that
two years to determine whether we will change companies or stay with The Standard.

In addition, the Employees Assistance Program will be supported by Value Options
beginning January 1, 2003. I ask your support in this change. We are not going
to be publicizing the 800 number at which you can access this EAP until very
late in this current calendar year. The reason is that you cannot currently
get services from Value Options and we do not want to confuse people with two
different 800 numbers-one with the current carrier Magellan and the second with
the new carrier Value Options. So please, if you see anything come across your
email or across your desk that has an 800 number for the new Value Options,
latch onto that, share that with your colleagues so that we can make as smooth
a transition as possible.

Information indicated in your packet gives you email addresses. If you are
more comfortable with the telephone number, please do not hesitate to contact
us. As Deidre said, if you do have questions I would be glad to answer them.
Karen Volmar, the Benefits Manager and I will stay after the meeting in case
you have any personal individual questions that you would like to ask of us.

Chair Moore: Does anybody have any questions to ask of Billie Willits? Thank
you very much.

The Senate Committee on University Planning is sponsoring Budget Presentation
for 2002-2003 and this will be a PowerPoint presentation and Executive Vice
President and Provost Rodney Erickson will make this presentation.

SENATE COMMITTEE ON UNIVERSITY PLANNING

Budget Presentation for 2002-2003

Anthony J. Baratta, Chair, Senate Committee on University Planning

Rodney A. Erickson, Provost: Thank you, Chair Moore. I was interested to see
that neither of my predecessors, Dean McConnaughay or Associate Vice President
Willits got questions on their presentations I have decided to give a third
of them to each one of those that I might get. That would leave me with only
a third of the questions. I also see that Chair Moore gave everyone a time limit
but me. But this will not go on more than 90 minutes I assure you.

I am very pleased to see what they have done here to make this room more user
friendly. I was not able to attend the September Senate meeting. I was at the
AAUDE Chief Academic Officers meeting so this is my first time in the remodeled
room here and it looks great. But I was trying to get readjusted when I got
in here and I realized that this is the level of the old platform so there is
obviously a false floor here and space underneath. So we will have someone moved
in underneath here next week as tight as we are on space.

Well, I want to thank the Senate for the opportunity to meet with you again
this year. I am going to move through this presentation in a quite deliberate
fashion because there are a lot of facts and figures here and hopefully you
will be able to keep up with us as we move through. I am going to share some
highlights about Penn State's current operating budget and summarize the university's
budget plan and appropriation request to the commonwealth for the next academic
year.

This year's budget-approved by the Board of Trustees last July-again gives
priority to attracting and retaining the highest quality faculty and staff.
Personnel costs are the largest part of our budget and reflect the people-intensive
nature of higher education. Competitive salary increases continue to be a special
concern.

Employee benefits are another arena in which we must stay competitive, and
the cost of health insurance, as Billie Willits indicated, is rising rapidly
all over the country.

We also want to maintain the resources that enhance the educational experiences
of our students. We have provided support for the School of Information Sciences
and Technology, technology initiatives, and the interdisciplinary programs in
life sciences, environmental studies, materials science, and children, youth,
and families.

The capital improvement program begun three years ago will be continued to
provide for renovations and high priority new buildings, and we will continue
to commit funds for deferred maintenance in existing buildings.

Let me start by summarizing the state appropriation for this year.

The total appropriation is $322,592,000, or roughly $12 million less in net
funds than last year. This is a decrease of 3.65 percent.

This is only the second time in recent years that Penn State's appropriation
has been decreased. The last time was in 1992-1993. As we all know, the commonwealth
is facing a difficult fiscal situation. This situation is not unique to Penn
State or to Pennsylvania - unfortunately it has become the norm for public higher
education this year.

We received a 4.2 percent decrease in our Educational and General budget.

We were pleased that previous commonwealth funding of $5 million for the School
of Information Sciences and Technology was folded into our E&G line.

The funding for agricultural research and cooperative extension was cut $334,000
from last year's level. This represents a decrease of less than one percent.

Funding for the College of Medicine remains at last year's level.

Other line items were reduced by five percent.

The state appropriation is just one piece of Penn State's budget. The total
budget for this academic year is $2.4 billion. The activities on the left side
of this chart are all self-supporting budgets. These include the medical center,
which represents 21.4 percent of the total budget, and restricted funds - primarily
research grants and contracts - which represent 17.8 percent. Auxiliary enterprises
comprise 9.8 percent.

The items on the right side represent the general funds portion of the total
budget. Tuition contributes 31.8 percent of the total budget and the state appropriation
contributes 13.4 percent.

Let us look more closely at the general funds budget of $1.05 billion. This
is the budget that supports the university's basic academic and administrative
activities and maintenance of the physical plant.

The state appropriation represents only 28.1 percent of our general funds budget
this year, a record low. Student tuition and fees contribute 65.6 percent. "Other"
income, such as recovery of indirect costs, departmental services, and income
on investments, contributes 6.3 percent.

We calculate income and expenses in one percent modules to provide some initial
parameters in budget planning. For example, on the expense side, a one percent
increase in salaries and related benefits this year costs about $6.6 million.
On the income side, a one percent increase in the state appropriation, excluding
Hershey and Penn College, yields about $3 million. A one percent increase in
tuition generates about $4.9 million in revenue.

The important point here is that a one percent increase in state appropriation
does not correspond directly with a one percent increase in salaries and benefits.
The cost of a 3 percent salary increase would be roughly $20 million. Hypothetically,
if we were paying for the $20 million out of our state appropriation alone,
it would require a 6.5 percent appropriation increase just to cover a 3 percent
salary increase. Or, if we were paying for the increase totally from tuition,
it would require over a 4 percent tuition increase.

Salaries and related benefits are the largest component of the general funds
budget, comprising over 70 percent of all general funds. Last year, I reported
that Penn State's average faculty salaries had slipped in ranking since 1995-96
in comparison to other Big Ten universities and the 22 public universities participating
in the Association of American Universities Data Exchange (AAUDE). However,
Penn State's commitment to making salary increases a high budget priority has
begun to show modest results, as we will see in the next two slides.

In the most recent rankings for Big Ten Public Universities, using 2001-02
average faculty salaries, we have improved at two of the three professorial
ranks.

We improved from fifth to fourth for professors, and from seventh to fifth
for assistant professors. We remained in sixth place at the associate professor
rank.

Here is the same comparison for the 22 public universities participating in
the AAUDE data exchange. You can see the drop in our rankings between 1995-96
and 2000-01. However, in the most recent rankings, Penn State has moved up one
position at the professor and associate professor levels, and two positions
at the assistant professor level.

These ranks are still far below where we would like to be, but we have begun
to see progress. We continue to hold competitive salaries as a high priority.

This year, we set a salary increase pool of 3.0 percent for merit-based increases
and for market, equity, and compression considerations. We continued the Faculty/Staff
Excellence Fund for special merit, market, and equity concerns. In addition,
the entire President's Excellence Fund was used once again to supplement the
salary increase pool to recognize our top-performing faculty and staff.

This slide shows our employee benefits cost increases this year for the university's
Educational and General operations. The net increase is more than $11 million.

Cost increases for health care insurance represent $9 million of this total.
Nationally, health care costs are expected to increase by an average of 20 percent
or more. We have budgeted for a more modest increase of 16 percent.

We are incurring increased costs of $2 million in the TIAA-CREF retirement
program due to the increasing number of university employees who participate
in this program.

In addition to employee benefits, we have budgeted $1.5 million for the increased
cost of property and liability insurances.

In recent years, the cost of purchasing health care has become prohibitive
for graduate students. This year's budget includes health coverage for graduate
assistants, fellows, and their spouses and children. This will be helpful to
our students and it will enable us to compete with other research universities
for the best and brightest graduate students.

The new health care coverage, similar to what is provided for faculty and staff,
will cost $7 million, with $4 million coming from general funds and $3 million
from sponsored grants and contracts.

Turning now to facilities cost increases, we have budgeted $8.8 million for
facilities and maintenance. This includes $3 million targeted for maintenance
and operation of new and newly remodeled facilities, such as the MBNA Career
Services Building and the Pasquerilla Spiritual Center at University Park, an
addition to the Franco Building at Penn State Berks, and an addition to the
Commons Building at Penn State Wilkes-Barre. Also included are provisions for
increases in fuel and utilities costs at all campuses.

We are continuing the capital improvement program begun three years ago to
help address the university's urgent space needs. We have set aside money for
financing the debt on construction and renovation projects above and beyond
those supported by the commonwealth. $4.8 million is included as the 4th year
of a six-year investment to allow us to incur an additional $180 million of
debt for capital construction and renovation projects. It also provides the
associated operating expenses for facilities that will be built from these funds.

An additional $1 million is included for deferred maintenance, bringing this
budget to $13 million in permanent funding. Penn State's backlog of deferred
maintenance projects currently totals approximately $200 million.

You will recall that we have been focusing on four interdisciplinary areas
that address important societal needs - the life sciences; materials sciences;
environmental studies; and children, youth, and families. We are continuing
that investment this year with an allocation of $1.35 million.

A total of $1 million is included for the School of Information Sciences and
Technology to continue its multi-year buildup, supplementing the $5 million
previously provided by the commonwealth on a separate line item.

$2 million is included in the budget for libraries and information technology.
These funds are provided from the student information technology fee and are
used for high priority student computing, telecommunications, and information
resource technology.

The budget also includes $1.2 million for need-based student aid. Although
we must raise tuition to offset shortfalls in our state appropriation and to
meet necessary cost increases, we continue to work extremely hard to increase
external donor support for student scholarships, and we want to make sure that
a Penn State education is accessible to all students in the commonwealth.

The $1.2 million we allocated this year and we expect to allocate in the following
four years will be used to provide matching funds for need-based student aid
with the new Trustee Scholarship Program that was announced in July. The Trustee
Scholarship Program will raise at least $100 million in endowment, and the expendable
income will provide ten to twelve million dollars of new student aid, including
the university match, in five years.

And a total of $3.4 million is included for other program adjustments. This
includes $1 million allocated for new faculty positions and instructional workload
adjustments that reflect enrollment changes in the colleges. In addition, $900,000
generated from increases in laboratory and clinical surcharges and the third
and final year of the Business Administration tuition differential has been
allocated to the colleges that generated the funds. $1 million will be provided
for high priority academic needs, as well as enhancements to classroom technology
support and student-related administrative computing services. And, $400,000
has been allocated for other support services, such as the university-wide parking
and transportation plan.

Penn State is continuing a program of internal budget reductions and reallocations.
A total of $5,639,000, or the equivalent of one percent in departmental operating
funds, will be reallocated within each college, campus, and support unit to
meet the highest priority needs that have been identified in their strategic
plans. An additional $2 million will be reallocated from central budgets to
help offset cost increases university-wide.

We are now turning to the income side of the equation. The tuition increase
approved by the Board of Trustees last July was 13.5 percent. Our mandatory
student fees increased 9.4 percent. When combined with a 6.8 percent increase
for room and board, the university's overall increase in the cost of attendance
was 10.6 percent.

Penn State is not alone having to implement larger tuition increases this year
than in recent years.

A poll of our colleagues at other Big Ten public universities makes it clear
that everyone has taken rather large jumps in tuition, and that a number of
them have considered a higher tuition increase for new students than for returning
students. As you can see, three institutions are using the "freshmen bump"
strategy of assessing higher increases for incoming students. Indiana's Board
has passed an additional $1,000 fee, effective in Fall 2003, for incoming students,
on top of a 12.3 percent increase for Fall 2002. Overall, tuition increases
in the Big Ten for this year's range between 7.9 percent and 19 percent for
continuing students, and from 19 percent to 34 percent for new freshmen at the
schools implementing new tuition strategies.

Last April, I appeared before the Senate to discuss the findings and recommendations
of a Task Force I chaired that was studying budget issues and forecasting tuition
needs. In July, the Board of Trustees endorsed and approved the recommendations
of the Task Force. I will briefly describe the tuition increases that followed
the Task Force recommendations.

You may recall that the Task Force endorsed the following recommendations-first,
that the most promising alternative to meet the university's budget requirements
is a combination of increased tuition differentials by campus location and by
student level, and incremental increases as needed.

Second, the Task Force concluded that higher tuition should be phased in beginning
with incoming freshmen, rather than for all students. Freshmen will be advised
of the increases before making their decision to attend Penn State.

Finally, with respect to student aid, the university should strive to ensure
that any student from the commonwealth will be able to attend Penn State through
a combination of federal, state, and institutional aid, supplemented by private
philanthropy.

In addition to the basic tuition increase next year, freshmen at University
Park will receive an extra tuition increase of $250 per semester, and freshmen
at other campus locations will receive an extra increase of $50 per semester.
The following year, 2004-05, freshmen and sophomores at University Park will
again receive an extra increase of $250 per semester, and their counterparts
at other campuses will again receive an extra increase of $50 per semester.

Larger differentials for upper-division students and for graduate students
will also be implemented in 2003-04 and 2004-05. At all campus locations, a
tuition increase of $90 per semester will be implemented beyond the basic tuition
increase for both groups of students.

The final portion of my remarks will take a look at the university's budget
plan and appropriation request to the commonwealth for 2003-2004. There are
no guarantees here, especially in this election year. Many steps in the process
need to be played out in Harrisburg and here before the Board of Trustees gives
final approval to the budget next July.

This slide summarizes Penn State's appropriation request for next year. It
includes a 4.5 percent increase for basic operating costs, or $14,529,000.

In addition, it requests $10 million support for one area of critical need,
the College of Medicine. I will explain more about this request in a minute.

The total increase requested is $24,529,000 and the total proposed state appropriation
is $347,121,000.

Our budget emphases are identical to this year's priorities. We want to continue
our progress in making up for lost ground in faculty salaries, meet the expected
increases in health care and other insurance costs, and continue to emphasize
facilities within the basic operating budget.

The three critical needs in the facilities category are funding and operation
for new or newly renovated buildings, deferred maintenance, and the capital
improvement program. Several projects are expected to come on line in 2003-04,
such as the Information Sciences and Technology, Chemistry, and Life Sciences
Buildings at University Park, Classroom Building at Altoona, Library/Classroom
Building at York, and the Workforce Development and Technology Building at DuBois.

Other large needs continue to be for libraries, student computing and telecommunications.
These will be funded from a proposed $15 per semester increase in the information
resources and technology fee.

We will continue to support academic initiatives and other program needs.

And, we have included another $1.2 million in the budget for need-based student
aid to match the Trustee Scholarships that I mentioned previously.

Penn State is nationally recognized as one of the most efficiently run universities
and we are committed to cutting costs further and finding new sources of income.
As I indicated last spring, Gary Schultz and I are co-chairing a Task Force
to explore additional cost savings through strategies such as further consolidation
of administrative units for greater cost efficiencies, reducing or eliminating
some support services that are no longer in high demand, and examining low enrollment
academic programs for potential mergers or closures.

This is a long-term effort, but we have targeted $2.5 million in central cost
savings beyond the internal budget and reallocation process for 2003-04.

As I mentioned, we are focusing on a single investment priority in this year's
appropriation request to the commonwealth-Penn State's College of Medicine.
Historically, the College of Medicine has received a much smaller share of its
operating budget from commonwealth appropriations than any similar university
medical school in the nation. Penn State's appropriation for medical education,
which is $5 million for 2002-03, has for several years ranked 75th out of 75
public medical schools in the United States - dead last. The average appropriation
for other medical schools is now approaching $50 million per year. In other
words, Penn State's appropriation is only about one-tenth of the average appropriation
for public medical colleges nationally. One result of Penn State's inadequate
state appropriation is that the College of Medicine has had to rely on Hershey
Medical Center revenues to provide support for medical education.

Due to changes in health care reimbursement, it is impossible to support a
college of medicine solely on clinical revenues any longer. The university is
requesting an increase of $10 million in appropriation for 2003-04 and plans
to request similar increases in 2004-05 and 2005-06, for a total increase of
$30 million in base appropriation for the College of Medicine over the next
three years.

That concludes my report. Again, my thanks to the Senate for the opportunity
to meet with you and talk about the Penn State budget for this year and our
proposal for next year and I would be happy to take some questions as time permits.

Chair Moore: Are there any questions for Provost Erickson?

Robert Gray, Penn State Erie-The Behrend College: My question sir is I saw
that you had the Big Ten universities, other universities and you show the increase
in tuition. Even with all those increases in tuition the percentage wise, if
you add that to whatever the base line is for that different college like Purdue,
Ohio State, Penn State, where does Penn State rank in what the students actually
are paying compared to other Big Ten universities?

Rodney A. Erickson: We rank right at the top of the Big Ten publics.

Robert Gray: The most expensive?

Rodney A. Erickson: The most expensive. For a number of years we trailed Michigan
by a very slight amount but we have now moved into the lead. It is a rather
dubious distinction to be leading.

Zachary T. Irwin, Penn State Erie-The Behrend College: Has there been any perceptible
impact on enrollments and do you anticipate any?

Rodney A. Erickson: We followed that very closely in the months following the
discussion that was made public following the release of the Task Force on Tuition,
the discussion that took place here in the Senate as well as the discussion
prior to, during and after the Board of Trustees meeting in July. We did not
see any perceptible difference in our paid accepts that then never showed up
as it were, and went into a non-enrolling status. It tracked very closely with
previous years. Now that said, it may be somewhat a function of all of the discussion
that was going on during the spring so that students actually had made decisions
already about where to attend prior to when we would think of the summer melt
having occurred. We plan for a class size that we essentially hit right on for
the fall. At University Park for example, we were targeting a freshman summer/fall
start of 6,000 students. We ended up with 6,076 so John Romano once again hit
very close to the mark. Every year is slightly different and that is what keeps
life so interesting for our folks in enrollment management and administration.
So overall I think we came out right about where we wanted to be; where we expected
to be. There are a few of our campus locations where we are a bit down from
where we would have liked to have been. But in virtually all of those cases
I think they are quite explainable in terms of the local economic conditions
where we had some specific problems in very localized areas. I could ask John
if he has anything he would like to add to that.

John J. Romano, Vice Provost and Dean for Enrollment Management and Administration:
The only thing that I would say is that this is something that we are going
to have to pay attention to for the years ahead. That we experienced no downturn
this year either in admissions or enrollments for the institution overall is
good, but this is something that as tuition continues to increase over the years,
it is something that is going to require all of our involvement together as
members of the faculty, staff and students, as new students are recruited to
the institution that is not performed by the admissions office alone. And as
students who are currently enrolled are retained on towards graduation, so that
our retention experience and therefore our ultimate enrollment at the institution
will be positive. So this is something that is going to require a great deal
of care over the years ahead I am sure.

Christine Clark-Evans, College of the Liberal Arts: You said some considerations
for the distribution of the increases would be by campus location and by student
level. Does that campus location include the geographical location or is it
separate into the colleges and schools?

Rodney A. Erickson: We have since 1996 roughly, a cost center model for the
campuses. All of the campuses are cost centers. University Park is a cost center,
Behrend is a cost center, the Commonwealth College is a cost center and so forth.
That aspect does have very strong enrollment implications to it because of the
tuition that is generated by those units. We also have something here at University
Park which is an instructional work load formula that over time moves resources
into those academic colleges that are undergoing increases in their enrollments.
Correspondingly there are decreases to those colleges that are experiencing
declines. It is a marginal kind of adjustment that takes place relatively slowly
so that there is no large-scale disruption to colleges that may be having a
decline in revenue in any given year. It really operates to fit the margin.

Gordon F. De Jong, College of the Liberal Arts: The question I would ask Provost
Erickson has to do with the fact that we are obviously a public university that
is not public anymore. We are private and we have to operate like it is private.
Research universities have two other important factors that you did not cover
and this is discounting of tuition with grants and scholarships to students.
So I would ask about the progress that we are making on the portion of our students
who are in fact receiving scholarships. And the second thing, of course, is
increased grant portfolios which have indirect costs which have impact on the
revenue side as well. Could you go into what the trends are in both of these?

Rodney A. Erickson: I would be happy to. About three quarters of our undergraduate
students receive some type of financial aid-federal, state, institutional or
scholarship funding from private philanthropy. Every year the needs increase.
No question about that. The campaign for Penn State, I think you are all aware,
we are in the late phase of the campaign which is a seven-year campaign to raise
$1.3 billion. We will get to $1.3 billion sometime around February of this coming
year. The campaign will officially end on June 30, 2003. That has been tremendously
important for us because we have been able to raise close to a half billion
dollars for student financial aid, largely in the form of endowment. But we
feel we have to continue to keep student aid as a very, very high priority element
in all of the fund raising that we do. Certainly, in the interstitial period
between this campaign and the next campaign, student aid will be one of our
highest priorities. And it was for that reason, in fact, that we launched the
Trustees Scholarship Program. That said, more and more of our students have
a larger proportion of their debt in the form of loans. That is something that
is simply a national trend, a national phenomenon. We want to do everything
that we can to achieve this goal that students in the commonwealth who have
the capability to succeed academically at Penn State will not be denied a Penn
State education because of a lack of funding. So I think that is a very important
commitment that we are really committed to as part of the development process.
But it will become more and more important as the appropriation becomes a smaller
and smaller share of our budget. As I indicated it is only 13.4 percent of our
total budget. The appropriation is now only a little over 28 percent of our
E&G budget.

With respect to the recovery of indirect costs, we are making good progress
in that area. I think when I become Vice President for Research a number of
years ago our indirect cost rate was around 37.5 percent. We have moved that
up to 41 percent and the new rate is about 44 percent that we have and we have
in fact managed to get it locked in for this year and next year. So we really
are recovering more in the way of facilities and administrative costs than we
have been able to do in the past, Gordon and obviously that supports a number
of things. That revenue stream flows right back into our general fund and really
helps to support all areas of the university.

David Breslin, Student Senator, Penn State Harrisburg: We are all aware of
the upcoming election next month and the biggest topic on the ticket is property
tax reform. The big idea is the state is going to take the burden off of the
counties to pay for the school districts to help them increase their budgets.
As such, that is going to be taking more money out of the state's appropriation
which is already dwindling due to the recession. Whether you want to admit it
or not, we do not have the tax revenues like we used to. What is the response
that you are expecting from the legislature when you are going in asking them
for even more money when the actual state schools that are fully funded by the
state are not being adequately sponsored by the legislature?

Rodney A. Erickson: Well, we are going to continue to make the case that we
have made all along that Penn State is a commonwealth asset and that it is important
to the future of the commonwealth to fund adequately all of our operations.
Not only our current operating budget but our capital budget as well. That is
a very important part of it. As I said, I think realistically next year is going
to be a tough year in the best of circumstances. I think if we do not recognize
that quite irrespective of who might win the gubernatorial race it is going
to be a tough year. I think it is clear that in order to pass the current budget
there were all sorts of stops that were pulled out. There are many un-funded
elements in the state budget so we are being very cautious in the current fiscal
year but we expect that we will make the strongest case possible and do the
best we can. As we want to continue to work with the next governor to make the
case that even if we do not get everything we want during the coming year, that
we want to position ourselves to have increased appropriations as the economy
improves. We also want to make the case to the legislature and the governor
that while they may not be able to help us as much as we would like with the
current operating budget, that we would like them to help more than they have
on the capital side. The Commonwealth of Pennsylvania has considerable capacity
for additional borrowing. We believe this would be a strong stimulus to the
economy as well as it would help us both directly and indirectly in the sense
that we currently have to service the debt on borrowing for buildings and projects
that are not funded by the commonwealth.

Kathleen L. Lodwick, Berks-Lehigh Valley: I want to ask a question about salary
equity for people on the non-University Park locations. There seems to be quite
a disparity between someone at Altoona and Berks or Schuylkill and Abington.
What is being done to equalize that and to also increase those salaries so that
they might somehow begin to approximate what people at the state-owned universities
are paid?

Rodney A. Erickson: There are a couple of points I would like to make there.
One is, I think there is often a lot of confusion somehow that the salary increase
pools are different in different places across the university and that is simply
not true. The average raise pool is the same in each of the 34 budgetary units
of the university. The second point I would make is I think the greatest problem
that we have encountered over the years is I believe that many of our division
heads, many of our department heads have not hired at appropriately high starting
salaries and as a result they found themselves in a very difficult position
of never being able to catch up. I met with one of our newer deans a couple
of years ago and I was frankly shocked to find the salaries that faculty had
been brought into that college by a preceding dean. It was so low that we were
several thousand dollars below market after only three or four years. In that
case we allowed the dean to make an adjustment to bring those individuals to
market level. We have consistently allowed our deans to move a limited amount
of operating money into the salary line in order to help deal with some of those
salary inequities and problems. I think that is where the greatest issue really
is, is hiring at market level and you cannot change things overnight but you
can really get to a position where you have much more equity. And believe me
it is not a situation that is restricted to one campus versus another. Obviously
within all of our campuses there are salary differentials by field as well that
have a very strong base in what is happening in the rest of the market.

Kathleen L. Lodwick: I read an article in the Washington Post a couple of weeks
ago about the level needed to support a family on welfare compared to some parts
of the country, and while many of our locations are not on par with Washington,
DC, I found it interesting that the United States government thinks what is
necessary to fund a family at the poverty level is more than we are paying some
of our full professors with 20 or 30 years of service. Now I know you can play
with statistics, I just throw that out.

Dawn M. Noga, Student Senator, College of Engineering: What percentage tuition
increase are you assuming if that request is granted?

Kathleen L. Lodwick: To forever date myself, I was the beneficiary of a federal
government program that targeted students who were willing to study areas of
the world that we needed people in or languages that people needed. And you
had eleven years to pay back this loan. You did not have to pay it back the
first year after you graduated. It was deferred if you went to graduate school
and canceled up to 50 percent if you decided to teach in certain institutions
such as an elementary school or university. It was an incredibly successful
way to educate people in this country in the 1960s. The universities facing
these kinds of tuition increases, is there any effort by the Big Ten universities
or any other group to get the federal government to come up with one of these
extremely generous programs that benefit the country as a whole I believe?

Rodney A. Erickson: The AAU for one group. The National Association of State
and Land Grant Universities. The ACE, the American Council of Education. Those
are the major lobbying groups and there are others including the AASCU that
are in Washington and have a very large presence there. Yes, certainly we are
always arguing for more student aid in that kind of form. It is interesting,
however, that among the current generation of students how many of these programs
go wanting for students who would take up that challenge. I guess too many of
us do not want our flexibility curtailed over the next several years. There
are many programs even within the state that have tried to keep Pennsylvania
students here in the state through various kinds of scholarship programs and
low or no payback and many of those have not been nearly as successful as I
expected that they would be when they were established. But there are many successful
programs for students that provide help for them to secure the necessary tuition
and loan resources to go to the university and many of them go on to careers
in the public service and that we applaud and support.

Chair Moore: Thank you very much, Provost Erickson.

Rodney A. Erickson: Thank you.

Senators: Applause.

NEW LEGISLATIVE BUSINESS

None

COMMENTS AND RECOMMENDATIONS FOR THE GOOD OF THE UNIVERSITY

None

ADJOURNMENT

May I have a motion to adjourn? The October 22, 2002 meeting of the University
Faculty Senate adjourned at 3:09 PM.

DOCUMENTS DISTRIBUTED PRIOR TO OCTOBER 22, 2002

Senate Council - Update on the Dickinson School of Law (Informational)